05 March 2018

RBI Lifts Per-Borrower Loan Capitalization for MSMEs

RBI Lifts Per-Borrower Loan Capitalization for MSMEs

In view of the increasing importance of the services sector and to encourage banks to lend more to this sector, the Reserve Bank of India has decided to do away with the per borrower loan limits to Micro/Small and Medium Enterprises (Services) for classification under priority sector lending.

So far, loans to Micro/Small and Medium Enterprises (Services) up to Rs5 crore and Rs10 crore, respectively, were classified as priority sector lending (PSL). Since the per borrower loan limits to Micro/ Small and Medium Enterprises (Services) have been removed, all bank loans to MSMEs engaged in providing or rendering services as defined in terms of investment in equipment under the MSMED Act, 2006, will qualify under priority sector without any credit cap.

Source- The Hindu Business Line

Static/Current Takeaways Important for Exams-

A small enterprise is an enterprise where the investment in equipment is more than Rs.10 lakh but does not exceed Rs. 2 crore.